Ventures Dialogue

The China-Hong Kong Closer Economic Partnership Arrangement (CEPA) was first introduced in January 2004 to increase the level of economic trade and cooperation between Hong Kong Special Administrative Region (SAR) and the Chinese mainland. 

Essentially, CEPA is a free trade agreement (under World Trade Organization (WTO) rules) which allows easier access to China’s market for Hong Kong made products and Hong Kong based service companies.  CEPA is China’s first bilateral trade agreement.  

Since 2004, there have been four supplements, with the most recent implemented in January 2008 (CEPA V). 

CEPA covers three broad categories: 

1. Trade in Goods - All classified “Made in Hong Kong” goods that meet CEPA rules of origin (ROO) from approved local manufacturers are imported, tariff free, into mainland China.

There are 1,502 tariff codes outlining the ROO criteria for classification as a Hong Kong made product.  Foreign products must be substantially transformed to meet CEPA standards. The major criteria are:

• Value-Added Content- This applies to about 11% of the 1,502 tariff codes. This origin rule requires the total value of labour, product development, component parts and raw materials to more than or equal to 30% of the free-on-board value of the goods.
• Manufacturing or Processing Operations- This applies to about 72% of the 1,502 tariff codes. This origin rule requires the principal manufacturing or processing operations which confer the essential characteristics to the final product are carried out in Hong Kong.
• Change in Tariff Heading- This applies to about 11% of the 1,502 tariff codes. This origin rule requires the processing and manufacturing of non-originating materials to be carried out in Hong Kong and resulting in a product of a different four-digit tariff heading under the “Product Description and Harmonized System Codes.” manufacturing or processing operations, and change in tariff heading.

Each shipment of goods exported to mainland China must be have a Certificate of Hong Kong Origin- CEPA (CO(CEPA)). Applicants must comply with 11 criteria to be issued a CO(CEPA) by the Trade and Industry Department (TID) or one of the five Government Approved Certification Organizations:

• The Hong Kong General Chamber of Commerce
• Federation of Hong Kong Industries
• The Chinese Manufacturers’ Association of Hong Kong
• The Chinese General Chamber of Commerce
• The Indian Chamber of Commerce, Hong Kong

Before applying for CO(CEPA), the Hong Kong manufacturer must apply for a Factory Registration (FR) with the TID. A FR validates that its factory has the capabilities to produce the goods for export.

2. Trade in services - Hong Kong service suppliers are given preferential treatment in entering into mainland China in many service sectors. Professional bodies of Hong Kong and the regulatory authorities in China have also signed a number of agreements or arrangements on the mutual recognition of professional qualification.

There are 28 service sectors in which geographical, financial, and ownership restraints are either reduced or removed. Any company, foreign or domestic, can apply as a Hong Kong company and take advantage of CEPA, provided that it meets the following criteria:

• Incorporated in Hong Kong
• Has operated for three to five years (depending on the sector)
• Is liable to pay Hong Kong profits tax

[A company (domestic or foreign/ Hong Kong or foreign) must pay profits tax if it carries on a trade, profession or business in Hong Kong and has profits arising in or derived from Hong Kong.] 

• Employs 50% of its staff locally

3. Trade and investment facilitation - Both China and Hong Kong have agreed to enhance cooperation in eight core trade and investment areas: 

• Customs Clearance Facilitation
• Quarantine and Inspection of Commodities, Quality Assurance and Food Safety
• Cooperation of Small and Medium-Sized Enterprises
• Cooperation in Chinese Medicine and Medical Products
• Electronic Commerce
• Trade and Investment Promotion
• Transparency in Laws and Regulations
• Protection of Intellectual Property

For more information about CEPA:

Trade and Industry Department of Hong Kong (SAR) http://www.tid.gov.hk/english/cepa/index.html 

Hong Kong Economic & Trade Office http://www.hketo.ca/invest/cepa.html

Ever had a craving for Fotiaoqiang (Buddha jumps over a wall), oolong tea from WuYi Mountain, lychees, or Longans?  If so, Fujian province should come to mind. 

Nestled between China’s most economically developed areas with the Yangtze River Delta to the north and the Pearl River Delta to the south, is Fujian province.  Fujian has an area of 121,400 square kilometers (46,355 square miles) and a population of more than 35 million people.  It is situated in southeast China, opposite Taiwan across the 180 kilomete-wide Taiwan Strait.  Zhejiang province lies to the North, Jiangxi to the west and Guangdong lies to the south (see map).  The capital city is Fuzhou, as well as its largest city.

Fujian is governed by both China (People’s Republic of China) and Taiwan (Republic of China).  China administers all but the archipelagos of Kinmen and Matsu, which are under Taiwan’s domain. 

Most of the province is mountainous with the Wuyi Mountains creating the border with Jiangxi province.  Huanggang Peak is the highest point in this mountain range with an altitude of 2157 meters (7077 feet).  It has a subtropical climate, with January averaging seven to 10 degrees Celsius.  Summers have high temperatures and typhoons are common, usually occurring from July to September.  Sitting on several small fault lines, Fujian is also prone to minor earthquakes. Annual precipitation ranges from 1.4 to 1.2 meters (3.94 to 4.59 feet), on average. Continue reading ‘Fujian Province – Optional Trip at 9th Hong Kong Forum’

A small Toronto-based commercial interior design firm, full scale + partners inc., has started to export its success in Canada’s retail and restaurant sectors to China. Here at home, during the past four years it has worked closely with major players such as fashion retailer H &M. In fact, it has designed almost 15 outlets in Canada. H & M (Hennes & Mauritz AB) also enjoys a global retail footprint with more than 1,400 locations in 28 countries. 中文版請點擊這裡

That Canadian connection indirectly led full scale + partners to help H &M set up its 40,000 sq. ft flagship store in Shanghai in April 2007. But behind that dream international engagement was a steep learning curve.

“Things are very different in China,” says Yvonne Ho, principal of full scale+partners. The other principal is Jenny Lee.  ”For example, in Canada there is just one regulatory commission for the issuance of building permits,” she says. “But in China, there can often be various levels of government and local district departments that must grant approval prior to construction. The standards & requirements from each district may vary within the same city.”

“I have seen a project that requires 22 stamp & seal from local departments prior to construction. Frankly, it was a bit of culture shock for us.”

However, full scale+ partners had earlier cut its teeth in China collaborating with local design firms in Shenzhen, a city of 9 million people in Guangdong Province on the boundary between China and Hong Kong. “These projects helped us to gain a better grasp of Chinese market conditions and how the real estate sector works over there,” says Ho.

Full scale leveraged that experience into the successful completion of the H &M Shanghai flagship store. Negotiations began in late 2006 and the deal was signed in January 2007. Construction was completed in 67 days in time for the April opening. Continue reading ‘Success by Design’

值此《VENTURES》网上通讯首发之际，我谨代表中华人民共和国驻多伦多总领事馆表示热烈祝贺，对广大读者表示亲切的问候，并感谢安大略省商会、港加商会为通讯首发做出的辛勤努力。

近年来，中加两国经贸合作持续发展，香港特别行政区、安大略省在其中发挥了积极的作用。双方经济互补性强，合作潜力巨大。我相信，《VENTURES》通讯的发行将会极大地促进中国与加拿大，包括中国香港特别行政区与安大略省之间的经贸交流。

衷心祝愿《VENTURES》通讯首发成功，并取得丰硕成果。

Nowadays when we look at China, we see a fast growing economy and market.

However, the numerous Provinces, Autonomous Regions, Municipalities and Special Administration Regions in China, with different market characteristics, represent often very different markets within the same country with different languages, cultures, business practices, and rules and regulations. This could present a challenge to prospective companies especially those which have no China trade experience.

Canadian companies, with limited resources, have to be rigorously strategic when devising their China business plans – not spreading their resources too thinly or wasting them. For starters, it may make sense for them to identify the best possible entry point into this huge and diverse market.

This best possible entry point “in China” should be able to provide the Canadian company with the right business partners, international legal system such as Common Law, and Intellectual Property (IP) security. It should also enable the Canadian company to make money and get paid.

This best possible entry point in China for Canadian companies is Hong Kong.

Hong Kong is THE international city in China. Hong Kong offers Canadian companies many advantages including freedom of movement of people, goods, capital and information. Hong Kong understands the West and the East, and many Hong Kong companies have extensive China trade experience and connections to share with potential Canadian partners and associates.

If a Canadian company chooses Hong Kong as its bridgehead for the Mainland China market or regional target markets, it will probably need to:

1. Obtain market intelligence
2. Find a business partner
3. Go to the market

To proceed, the Canadian company can leverage on the services and initiatives provided by the Hong Kong Trade Development Council (HKTDC), Hong Kong’s statutory trade promotion agency. For more information, interested parties can contact Constance Leung, Business Development Officer, HKTDC Toronto Office, Tel: (416) 366-3594, email: constance.h.leung@tdc.org.hk or visit the portal site of HKTDC:http://www.tdctrade.com/

With the launch of VENTURES, your Ontario Hong Kong China business dialogue, a collaborative initiative between the Ontario Chamber of Commerce (OCC) and China focused business associations in Ontario, has taken shape.

VENTURES is an online publication, designed to stimulate more business exchange between Ontario – Canada and Hong Kong – China, and comes as a result of the China Initiative, a partnership announced in November, 2006 by the OCC and the Hong Kong Economic & Trade Office (HKETO).  The China Initiative was borne from HKETO’s mandate to reach out to businesses in Ontario, and the OCC’s desire to help its members bridge the cultural and geographic gap to the Asia Pacific region. 中文版請按這裡

“The importance of the Chinese market to Canadian companies is often underestimated,” explains the Hong Kong Economic and Trade Office.

 ”With an average growth rate of 9.6% since the late 1970s, China presents unparalleled opportunities and challenges.  Ontario companies need a China strategyin order to tap inot this lucrative market, as well as to fend off increasingly fierce competition in a global market.  The Chinese market is not just for big corporations.  Canadian SMEs can always share the pie if they have the right tools.”

HKETO has been providing outreach to SME’s, largely in the GTA, to help them learn more about opportunities in China, and to demonstrate the advantages of using Hong Kong as their launching point into the Chinese market.

“The primary mission of HKCBA, very much a national Canadian business association, continues to be to encourage Canadian business – particularly the small and medium business enterprises – to be take the opportunity and initiative to expand their activities, now, and increasingly in future, in the rapidly growing China marketplace,” says Robert Brown, an HKCBA Founding Director.  “We assist by providing advice and examples as to how they may do this, in confidence and safety, by using Hong Kong as their business platform to other parts of China and South East Asia.  VENTURES is a practical extension of our ongoing activities.”

“I suppose you could say we’re the new kids on the block here,” says Len Crispino, President & CEO of the Ontario Chamber of Commerce.  ”But many of our members see the enormous potential offered by the robust economy in Hong Kong and China, only they don’t know where to start.  VENTURES will help us provide valuable insight and information, while also positioning Ontario as an ideal location for investors from China.”

As a platform for dialogue about Sino-Canadian business exchange, VENTURES is just the beginning of the conversation.  Over time this publication will become more interactive and provide an unparalleled platform for discussing and promoting two-way trade.   Future activities are also planned to build on the momentum created by this initiative.

Letter of Congratulations from Consul General of the People’s Republic of China in Toronto

China promises "a shopping spree of historic proportions," Janet De Silva

China’s growing middle class is expected to transform the global consumer marketplace as we know it, according to the CEO of a Hong Kong based company called retailChina.

Speaking to The Hong Kong Canada Business Association, Janet De Silva, explained that by 2009, the number of middle-income consumer class households in China is expected to triple to 105 million and to reach 520 million by 2025.

In China, these households are much more youthful than other developed countries. According to De Silva, many of China’s emerging middle class consumers are young professionals between the ages of 25 and 40, with significant, discretionary spending power. More importantly to Canadians, they’re first generation consumers with no brand loyalty, and they value goods produced outside of China.

De Silva, a Canadian who was previously the Chairman and CEO of Sun Life Financial (Hong Kong) Limited, says China is unlike any other market. In order to successfully sell to China, companies must understand the geographic diversity and differences in consumer tastes and attitudes.

De Silva describes dramatic differences between consumer preferences in China’s largest four or Tier 1 cities, and the 11 cities labeled as Tier 2. In Beijing, Shanghai, Guangzhou and Shenzhen, consumers are looking for items that demonstrate their rising status; whereas in tier 2 cities like Nanjing and Xi’an, consumers focus more so on safety and hygiene. Successful companies adapt their marketing strategies accordingly.

Of course price point is vital. Retailers must be able to drive down costs in order to succeed in the market. And for retailers, the biggest barrier, according to De Silva is getting experienced people and keeping them.

Working directly with the property developers of international malls in China (200 new malls in the next 3-5 years), retailChina is looking to acquire international brands to market to this burgeoning middle class. Already the company is marketing Fruits & Passion in 12 stores in China and plans to grow that network to 80 stores by 2010.

China promises “a shopping spree of historic proportions,” says De Silva, with all international brands equal in the eyes of the Chinese consumers. While “Made in Canada” has no particular brand, Canadian retailers have an equally tremendous opportunity to sell to what will someday be, the world’s largest middle class consumer market.

Canada and Hong Kong sign MOU on investment promotion co-operation.

“Canada places great importance on enhancing its commercial relations with Hong Kong and recognises the benefit of increasing two-way investment between our economies,” according to Mr David Emerson, Canadian Minister of International Trade. “Hong Kong, an international financial centre, ranks third among Canadian investment destinations in Asia.”

Hong Kong’s Secretary for Commerce and Economic Development, Mr Fred Ma, welcomed the MOU signing and highlighted Canada’s longstanding recognition of Hong Kong as a strategic investment destination.

“This is an important step which reinforces the well-established ties between Canada and Hong Kong,” Mr Ma said. “We look forward to this MOU benefiting investors in both our economies, and promoting overall economic growth.”

 He encouraged Canadian companies to fully utilise the opportunities arising from the Closer Economic Partnership Arrangement (CEPA) between Mainland China and Hong Kong. The Arrangement provides Hong Kong goods and services with preferential market access opportunities in Mainland China.  This will benefit foreign-owned or controlled companies incorporated in Hong Kong.

The MOU will also help identify strategic investments from Hong Kong into smaller Canadian companies who are seeking capital and local market expertise to launch business opportunities into Mainland China. Investment promotion is an important part of the new Global Commerce Strategy of the Canadian government.

A series of seminars will be jointly organised by the Hong Kong Commerce and Economic Development Bureau and Foreign Affairs and International Trade Canada. These seminars will take place later this year in cities across Canada to explain the benefits of the CEPA to Canadian business leaders.